FAQ: The fuel subsidy protests in Nigeria

A decision by the Nigerian government to halt a hefty fuel subsidy on January 1 prompted one of the largest and most coordinated protests in Nigeria’s history. Though the protests are over, the issues that prompted them remain.

UPDATE, 2/9/2012: Yesterday, President Goodluck Jonathan appointed his rival in last year’s presidential election, Nuhu Ribadu, as chairman of a new oil task force dedicated to tracking revenues paid to the government, and monitoring crude oil production and exports. Mr. Ribadu is formerly the chairman of Nigeria’s Economic and Financial Crimes Commission, and accepted the post at the helm of the 21-man Petroleum Revenue Special Task Force despite his political affiliations because of the “national consensus” on the “deadly impact of corruption.”

What is the fuel subsidy?
Though Nigeria produces more than 2 million barrels of oil a day, the vast majority of Nigerians see limited benefits from their country’s natural resources. Nigeria has four oil refineries that only operate at about 23 percent of their potential capacity — and as a result, the government has had to import refined products such as petrol to meet the needs of citizens. The government paid the importers in order to control the price, kept low at $1.70 a gallon, thus ensuring that Nigerians were able, until January 1st, to enjoy the low fuel price as one of the benefits of the crude oil they produce.

Why did the government remove it?
On the first day of the year, President Goodluck Jonathan removed the hefty fuel subsidy. Though the subsidy keeps fuel prices low for Nigerians, the cost of the subsidy comes out of government coffers. The $8 billion per year the government was spending on the fuel subsidy is equivalent to more than 25 percent of the government’s annual budget. Many observers argue that subsidies do not ultimately benefit the poor and the money could be better spent in social sectors such as education or public health.

What was the response to its removal?
The removal of the fuel subsidy, and the immediate increase in the price of fuel, transportation and food, came abruptly, and disregarded ongoing negotiations with the labor unions and civil society. The cost of a gallon of gas increased from $1.70 to $3.50 overnight. Tens of thousands of Nigerians protested the removal of the subsidy and Nigeria’s major labor unions organized strikes shutting down businesses, schools and air travel for 8 days. The fundamental grievance Nigerians had with the removal of the subsidy was not just the resultant increase in fuel prices but also that the subsidy regime was a well-oiled corruption machine that should have been addressed before the subsidy itself was removed.

Why was the removal partially reinstated?
The Nigerian President restored part of the fuel subsidy on January 16. This brought the price of a gallon of gas down to $2.27, and ended the biggest protests in Nigeria’s history. The deal also forestalled a plan by the trade unions to halt the country’s oil production, a move which would have hurt Nigeria’s economy.

What does the episode say about governance in Nigeria?
Though the President announced that the removal of the fuel subsidy would give the government the means to fix the country’s many basic infrastructure problems, most Nigerians remain skeptical that these noble objectives will ever be realized. This is because there was no way to ensure that the money would go to meet these goals. Nigeria has been plagued for decades by corruption and mismanagement especially in the oil sector.

The abrupt nature of the removal of the subsidy which was seen by some as act of insensitivity by a government that is out of touch with the economic struggles of the majority of the Nigerian people. Even with a more gradual plan, transparency and accountability would be necessary to ensure Nigerians know that the funds are being properly channeled to projects and social development programs that would benefit the poor. While the partial reinstatement of the subsidy has quelled the protests and kept the economy going, the root causes of the protests remain unresolved.

What is different about these protests?
A bulging middle class with access to the internet took to social media platforms including Facebook and Twitter to swell the protests, which organized under an “#OccupyNigeria” banner based on similar movements in Europe and the US. These platforms, and the general message that the government was not listening to the voices of the Nigerian people, gave the middle-class a channel through which to make their voices heard and engage with other protesters.

Nigeria has had a turbulent start to 2012, with fuel subsidy protests and deadly bombings by Islamic extremist group Boko Haram. Keep an eye out for updates on the landscape of governance in Nigeria on the ONE Blog.